Exxon raises US$9.5b in new debt

Exxon raises US$9.5b in new debt

Exxon Mobil logo
FILE PHOTO: A logo of the Exxon Mobil Corp is seen at the Rio Oil and Gas Expo and Conference in Rio de Janeiro, Brazil. REUTERS/Sergio Moraes

NEW YORK: Exxon Mobil Corp on Monday (Apr 13) raised US$9.5 billion in new debt, with the largest US oil producer seeking to bolster its finances while debt markets remain open to new deals.

Exxon paid a lower price to borrow than it did in a similar debt deal almost four weeks ago, a sign of how investor confidence is gradually returning after a rout in energy prices and a stock market collapse fuelled by the coronavirus outbreak.

Nevertheless, borrowing costs for Exxon were still higher than prior to the coronavirus outbreak.

Exxon raised US$9.5 billion by selling five different bonds with a variety of durations ranging from five years to 31 years, up from US$9 billion which it had originally planned to raise, indicating robust investor demand.

In an example of how the company's borrowing costs have come down in recent weeks, it priced a 10.5-year bond worth US$2 billion at a 185 basis-point premium to US Treasuries with a 2.61per cent yield. 

On Mar 17, Exxon sold US$2 billion in debt with a 10-year duration where the premium to US Treasuries was 240 basis points and the yield was 3.482 per cent.

In August last year, Exxon raised US$1.25 billion through a 10-year bond with a premium to U.S. Treasuries of just 75 basis points and a yield of 2.44 per cent.

The new issue by Exxon comes as highly rated US companies have been tapping debt markets for cash at a record clip, stocking up on cash due to the uncertainty surrounding the economic impact from coronavirus.

The logic behind Exxon's deal was to stock up further on cash while the market is still open to issuers of new debt, according to a person familiar with the matter.

Exxon's stock has been hammered this year by the collapse in oil prices, with its share price down 38.7 per cent so far in 2020, a steeper fall than the 14.5 per cent drop in the benchmark S&P 500 Index .

In a regulatory filing, Exxon said it planned to use the proceeds for "general corporate purposes."

Oil prices were mixed on Monday, as the historic production-cut deal signed by major global oil producers was not enough to assuage existing worries about the demand destruction brought on by the coronavirus pandemic.

Other companies to issue new debt on Monday included US industrial conglomerate General Electric Co , drug store chain Walgreens Boots Alliance Inc and movie theater operator Cinemark Holdings Inc.

Source: Reuters